One of the most labyrinthine matters related to collecting silver bullion coins is coin grading. Naturally enough, in a business which involves the buying and selling of collectible items whose value can rise or fall depending both on their individual condition and the whims of the market, people want a system allowing them to evaluate what price they should pay for a specific coin, or what they should ask for it when they have one to sell.
Several different systems of grading coins, based both on the quality of individual coins and on the rarity of the coin type, have been devised. The subject is a complicated one for a newcomer to the silver and gold bullion coin market, due to the fact that there are several systems which were created more or less independently of one another, and which operate under different criteria.
The various countries of the world have their own variants on the coin grading system, and even in cases where the majority of numismatic experts, coin dealers, and silver collectors have adopted one of the international systems of grading, it is often the case that certain grades are renamed, or omitted entirely from the sequence. This makes foreign grading of coins confusing at times, and you should always check for local variants before you make a decision based on the grades you see on a website.
Furthermore, it is nearly impossible to get experts themselves to agree on the grade of a coin even when they are using precisely the same grading system. Two different coin grading services will often return different results from the same coin, because grading involves many subjective factors.
This does not mean coin grading is useless, rather it indicates that you should be aware of its limitations and compensate for them in your thinking. A grade is a general guide, not a cut-and-dried absolute on some rigidly scientific continuum – an informed opinion, perhaps, and possibly a very accurate one, but not the word of God, either. Grading is not precise, but it is still an adequate guide to the approximate condition of a coin and the expected fair price.
How to Grade Silver Coins Yourself
Although coin grading is a tricky matter, and only an “official” grading by one of the major grading companies will carry any weight as a basis for price in numismatic circles, learning how to grade coins yourself, even approximately, is an invaluable skill for anyone planning to buy silver coins. If you are only going to purchase boxes and tubes of coins straight from the mints’ authorized dealers, then you will not need this knowledge. But anyone who is interested in acquiring collectible coins does.
The reason why learning how to grade coins yourself is so imperative is that you need to be able to look at a coin offered for sale somewhere, whether it is at a coin show, a flea market, a coin dealer’s shop, or whatever, and form a good idea of whether or not it is genuine – and if it is, whether it is worth the asking price. You are likely to encounter far more coins that are authentic but overpriced in light of the condition they are in, than fakes.
You need to form a good appraisal of how much a coin is worth both so that you do not spend too much on it, and so that you can identify unexpected bargains on the very rare occasions when they occur. There is a slight chance, after all, that someone will underrate their own coin, believing it to be of a poorer grade than it actually is, and price it accordingly. Being able to spot such a rare deal and snap it up is another pleasant “perk” of learning how coins can be graded.
In short, knowledge of how you can grade coins can both save you money – and possibly help you to make more of it as well.
The Basics of Grading Coins
The metal that coins are made out of is tough, durable, and resistant, but it cannot withstand constant rubbing, abrasion, and other abuse without losing some of its surface mass eventually – in short, even a metal coin gets worn. This is especially true of silver and gold, which are softer than the “base metals”, with the exception of lead and a few rare types. Just being handled will eventually cause some softening of the imagery, and there are many circumstances that will have an even bigger impact.
Historic coins which were actually used as currency are particularly subject to wear, since they spent much of their time in pockets, pouches, and other containers, rubbing and scraping against other coins. These are, of course, also some of the most valuable coins, and those which it is most necessary to accurately and quickly grade in order to determine if you’re looking at an opportunity or a howling dud.
In order to start grading a coin, you will first need to determine whether it is circulated or uncirculated. This is often obvious from the coin itself. Practically all American coins from before 1933, for example, are circulated, since they were still being used as legal tender. All ancient coins, medieval coins, and coins up to 1900 or so can also be assumed to be circulated. Recent coins, however, are typically uncirculated.
There is a different grading procedure for each, because coins which have been circulated are worn by human fingers, other coins, and the like. Uncirculated coins may be damaged with nicks, scratches, and the like, but they are never worn, which is long-term erosion of surface features by contact with other objects.
The American Numismatic Association (ANA) Grading Scale
One of the best grading scales currently available is one which was designed – and subsequently revised – by the American Numismatic Association, or ANA, during the 1970s and 1980s. It is, of course, no accident that the scale was devised during the period which witnessed a huge upsurge of interest in silver bullion and collectible coins, an upsurge which continues to the present day.
This scale ranks coins from 1 to 70 – although there are also ranges which run from zero to seventy, with a zero rating indicating a coin which is so worn or damaged that it is still recognizable as having been a coin once, but which does include enough of its design any more to be successfully identified. Such coins are obviously not collectible anyway, and are worth no more than their melt value – though it should be noted that they are difficult to liquidate as well, unless you sell the raw silver to a jeweler, who may or may not be interested in such a tiny purchase.
The scale is useful to learn because it gives you a means not only of judging how good a coin is, but also communicating your opinion clearly and concisely to other coin and silver enthusiasts. Good communication is the foundation of good business, and even if you do not reach an agreement and no deal is struck, it is good to at least have an idea of what the disagreement was about.
Grading for Circulated Coins
Coins which have been circulated have a grade somewhere between 1 and 59. Grades above 60 can only be used to describe uncirculated coins, because circulated coins always have at least some wear, and uncirculated coins have none, placing them in a totally different category.
The level of wear and the clarity of the impressions on the coin are the determinant of where it falls on the scale. Here are the grades for circulated coins from best to worst:
• About Uncirculated, or AU, are those coins with a grade of between AU-50 and AU-59, with the recognized grades being AU-50, AU-53, and AU-58. These coins can have mint luster remaining and superficially resemble mint coins, but inspection reveals small amounts of wear.
• Extremely Fine, either EF or XF, are coins with grades of EF-40 and EF-45. They are characterized by very clear designs and possibly traces of mint luster, but light wear and a general loss of that mirrored sheen.
• Very Fine, or VF, coins are members of a broad category, which stretches from VF-20 through VF-25 and VF-30 to VF-35. Coins with a medium amount of wear or softening on raised details are included in this category. If there is light scuffing on fields and other recessed areas of the surface, the quality is nearer to the VF-20 end of the category.
• Fine, or F, coins are either F-12 or F-15, and which are generally worn, but still include all of the original design, even if it has lost a lot of its original material. In order to be fine, the lettering of the coin must be legible, even if parts of the imagery can no longer be picked out.
• Very Good, or VG, coins are heavily worn, with a lot of the original detail gone, but the outlines of the design and the lettering visible. VG-10 coins feature lettering that is all readable, if worn, while VG-8 coins only have a few letters still legible.
• Good, or G, coins are either G-4 or G-6. Coins with the main design mostly erased, but with peripheral lettering and rims still present, are Good. G-6 is a coin with clear peripheral lettering and an intact rim, while G-4 has worn peripheral lettering and possibly light erosion of the rim as well.
• About Good, or AG, coins have one designation – AG-3. These coins may have one side practically worn away, or both worn with the exception of peripheral lettering. Some rim wear is always present, and may be moderate.
• Basil State, or B, also known as Poor, or PO, is a coin designation for all those coins which are still identifiable, but barely. These coins cannot have actual holes through them – which either makes them grade zeros or throws them out of the category of coinage entirely, depending on whether grade zero is being used.
Grading for Uncirculated Coins
Uncirculated coins are generally in far better shape than their circulated brethren, so they use the parts of the grading scale between 60 and 70. The abbreviation MS, or Mint State, is used for these coins’ numerical grade. From the best to the worst, the grades of uncirculated coins you may encounter are (note that all ratings in between are used, as well, but there are only five descriptors):
• Perfect Uncirculated, MS-70, are coins with absolutely no flaws, including those visible under five times magnification (so you will need a jeweler’s loupe of that power to grade uncirculated coins successfully). These must be absolutely pristine with a full, deep, shimmering, unbroken luster.
• Gem Uncirculated, MS-67, superb quality with only the tiniest abrasions or nicks, and a full, beautiful luster. It is distinguished only from Perfect Uncirculated by flaws which can be seen under 5x magnification.
• Choice Uncirculated, MS-65, is distinguished by minor marks but a generally perfect striking with crisp, unblurred detail and full luster with the exception of the minor scrapes noted.
• Select Uncirculated, MS-63, coins have noticeable hairlines and marks, but are still in excellent condition and have at least moderate luster remaining.
• Regular Uncirculated, MS-60, are those coins which have no actual wear but are scratched, nicked, and scraped to a considerable extent; they are still attractive and valuable, but most of their lustre may be gone.
Using a Professional Grading Service
In the event that you are planning a purchase of silver coins, you may or may not need the efforts of a professional grading service prior to making your decision. For many coins, grading is unnecessary – for example, when you are buying boxes of uncirculated silver bullion coins from a supplier, and the coins involved have reached the dealer directly from the mint, then they are obviously in mint condition (from which this level of quality has taken its name – that is, the condition they are in at the mint when freshly struck).
Silver rounds do not need to be graded either, though it may be necessary to assay a purchase of rounds or bars at times so that the fineness of the silver can be discovered (this, too, is rendered unnecessary by buying through a good quality online silver dealer, such as APMEX, since if the silver is guaranteed to be of a certain fineness, it has already been assayed). Since rounds are worth slightly more than the spot price of their constituent silver, the only difference that the legibility or illegibility of the round’s decorate is the wight of silver that might have been lost when the round became worn.
You can grade coins yourself, of course, for your own information, and there exist many printed guides specifically telling you what steps to take and what to look for. Self assessments are, naturally, not widely accepted as a basis for either buying or selling, and if you want the assessment to affect more than your own internal thought processes on the matter, then you will need to make use of a professional grading service.
In the United States, there are currently four main grading services whose gradings are accepted worldwide as valid. It is interesting to note that these grading services frequently disagree on the grade to assign to a coin despite their undoubted professionalism. These services will accept international inquiries as well, though shipping costs are quite steep. There are also many highly reputable coin grading services in other countries, serving collectors there, usually with a focus on national coinage.
Professional Coin Grading Service (PCGS)
PCGS is an American coin grading service located in Newport Beach, California, on the nation’s famous west coast. Although the firm is naturally most expert in American coins, it is also highly skilled in certifying those coins which come from the European Union, the Commonwealth of Independent States (Russia and its various satellites), the Far East, Africa, and Oceania. In particular, the service is in direct alliance with the Mints of New Zealand and Poland, and is seeking direct ties with more mints worldwide.
Interestingly, there is also a price guide to American coins freely available on the site, allowing you to form a rough estimate of how much a rare coin in your possession is worth – or how much it will set you back in the event you want to buy it. With a few clicks you can learn, for example, that an 1805 Draped Bust Quarter with a grade of 4 is worth $450, while one with a grade of 64 can be worth up to $49,000.
Like most American grading companies, PCGS uses a 1 to 70 scale of grading, which was developed by William Sheldon at around the time of the Second World War. Grading coins with a probably worth less than $10 should be avoided, since the costs will exceed the worth of the coin.
PCGS has had a rocky past and is noted for its uncommunicative customer service, as well as its refusal to grade any coins not on its (admittedly extensive) list. Some people have had good experiences with this firm, while others have undergone shabby treatment and received dubious gradings. However, there is also no doubt that PCGS gradings are highly respected in the numismatic world.
Coin Grading Service UK (CGS UK)
CGS UK is a good example of a highly respected, highly reliably coin grading service that is mostly focused on the coins of the country it is located in – specifically, in this case, the United Kingdom. Coins from 1660 to the present day, all originating in the British Isles, are graded by CGS UK. Like most coin grading services, CGS UK “encapsulates” the coin in a tamper-resistant plastic case, which is known in the slang of the coin world as a “slab”.
Once again proving that grading is one of the most complex parts of coin collecting, CGS UK has its own idiosyncratic grading scale of 1 to 100, unlike the generally accepted 0 to 70 grading scale that is used in the U.S. and by many other grading services as well. Generally speaking, coins with a grade of 82 or above are “choice” and therefore command a much higher premium in the event they are rare.
Numismatic Guarantee Corporation (NGC)
Another American company which uses the 1 to 70 scale introduced by Sheldon, with 60 and higher being MS, or Mint State Uncirculated. Grading is carried out in a period ranging from 24 hours to 40 working days, depending on how much you are willing to pay to have your coin graded by this firm. The cheapest grading (with 40 working day processing) costs $17, which the top-line, elite grading service costs a full $600, indicating how only highly valuable coins should be graded in this manner.
The NGC will grade coins from the United States, from a list of several dozen international mints (which should be enough to cover all but the most obscure bullion coin issues), and from antiquity as well, though the grading process and costs may vary somewhat between categories. The NGC is, of course, the subject of debate in the coin community, with some feeling their grading is too strict, others that it is too lax, and yet others that it is close to ideal.
Problems with Counterfeit Grading Company Slabs
Once a coin is “encapsulated” in its plastic “slab”, along with slips of paper indicating authenticity and giving the individual identification number from the grading company that allows you to check its value instantly online, it is supposed to be a highly reliable purchase, since you have a guarantee of value and the fact that it is genuine and therefore contains the proper amount of silver, among other things.
However, the recent years have witnessed an explosion of highly sophisticated fake encapsulations, including a genuine identification number which has been taken from a real coin of the same type, in order to fool buyers who check online before purchasing. These counterfeit slabs are nearly indistinguishable from the real thing except to an expert’s eyes, and have even been sold on eBay.
Most of the coins in these fake slabs are also fake, but a few may be genuine coins placed in the slab in good faith by someone who was unaware that it was counterfeit. Unfortunately, a “slab” is no longer the steel-solid guarantee of authenticity it once was, and you will need to figure other elements in as well, including the reputation of the seller and so forth.